Thursday, March 15, 2012 9:02 a.m. ET
DJIA: 13,194.10 S&P 5400: 1394.21
Yesterday was a “consolidation”day. While declining issues on the NYSE outnumbered advances by 2.8 to 1 (Nasdaq: 2.2 to 1), “UP” volume vs. “DOWN” volume on both exchanges was overwhelmingly positive, a sign that there was aggressive buying, just not across the board. I’ll take it as a positive.
Obviously, the stock market’s buoyancy is attributed to relief that contagion in Europe has been avoided for now at least, but more so that the U.S. economy is gaining traction.
For that reason, every week the Street looks to economic reports for reassurance. If it falters, the market will take a hit. If it continues to pick up, the BIG money will begin to look out 9 to 15 months to what it believes corporate earnings will be in an improved environment and that will justify paying up for stocks now because prices will be higher in the future.
Today’s reports are very important and so far upbeat. Jobless Claims were down 14,000 to 351,000 (lowest in 4 years) and the Empire State Manufacturing Index the highest in 19 months. Producer Prices rose 0.4% from 0.2%, though “Core” rates were reversed at 0.2% vs. 0.4%
I read reference in the news today about investors being nervous because they felt the stock market has advanced too much so far this year.
Let’s not forget that Pre-Election Years have outperformed the other three years in the election cycle by a healthy margin. Election years rank number two.
However, 2011, a pre-election year, was flat.
It could be that 2012 is going to inherit some pent up strength that was muted by events in 2011. Throw in a shift out of “safe” investments (treasuries, money markets, CDs, etc.) and you have the potential for an exceptionally good year.
CONCLUSION: These are ingredients for a bull stew that can move from a simmer to a boil and investors must open their minds to that possibility so they are mentally and emotionally prepped for decisions that will add beef to their portfolios.
One of the reasons the public is out of the market or parked in bond funds is that (no thanks to the TV, radio and some print media) bludgeoned to submission that doom is guaranteed, if one adversity doesn’t cripple you, another one will. There’s market share in terrorizing viewers/listeners/readers and these are the investors who will come plunging in at the top, as (guess who ?) is selling – the BIG money.
TODAY: Mixed open. The DJIA may dip below 13,150 (S&P 500 below 1390) but should rebound in late morning to post a nice gain for the day.
ECONOMIC REPORTS: The stock market doesn’t always march to the drumbeat of the economy. This time around, the intensity of the economic recovery is critical to a further extension of the bull market that started three years ago. This recovery must continue to gain traction, even accelerate to offset the drag of a slowing international economy if the market is able to move higher.
- Retail Sales (8:30 a.m.) February Retail Sales posted a solid 1.1% gain with gains in 11 of 13 categories. Autos were strong. This comes on the heels of a 0.4% advance in January after no gain in December as a result of a slowdown in auto sales.
- Business Inventories (10 a.m.) January Business Inventories increased more than projected, rising 0.7% on top of a 0.6% rise in December. Economists expected a 0.5% rise. The increase is mostly attributed to an increase in auto production in anticipation of increasing sales.
- FOMC Meeting (2:15) Rates remained the same, no mention of QE3.
- MBA Purchase Applications (7 a.m.) Measures application for mortgages with lenders. Apps jumped 8.4% for the week ended Feb. 24.
- Import/Export Prices (8:30 a.m.) Imports rose 0.03 in Jan., The numbers were goosed by petroleum prices.
- Jobless Claims (8:30 a.m.) Just in: Down 14,000 to 351,000, a good number.
- Producer Price Index (830 a.m.) Up 0.4% in Feb. vs. a 0.1% rise in Jan. However, core PPI was a plus 0.2% in Feb. vs. a 0.4% in Jan.
- Empire State Manufacturing Survey (8:30 a.m.) The index of this regional survey of business rose sharply in February to 19.53 the best reading in 18 months. March came in even higher at 20.21.
- Philly Fed Survey (10 a.m.) Rose 2.9 points to 10.2 in Feb. reflecting good business activity in the Mid-Atlantic manufacturing area.
- Consumer Prices (8:30a.m.) Rose 0.2% following no change in the prior two months.
- Industrial Production (9:15 a.m.): Was unchanged in Jan. after a 1.0% increase in Dec.Monthly reports have varied. Capacity utilization has trended up six out of the last seven months.
- Consumer Sentiment (9:55 a.m.) has been on the rise since August. It will be interesting to see if rising gasoline prices can reverse sentiments.
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.
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